Obama administration offers student loan relief

1. Earlier start date for enhanced Income-Based Repayment Plan

The way it works now is that graduates who enroll get charged 15% of their monthly discretionary income to pay off loans, with debt forgiven after 25 years.

Congress passed a law set to go into effect in 2014 that would drop the monthly payment to 10% of discretionary income and would forgive all debt after 20 years. The Obama administration would improve on the law by fast-forwarding the new terms to take effect in 2012, sources say.

The bright spot for the unemployed is that the monthly payments are based on any income above 150% of the poverty line. For a graduate living alone, the payments would be on 15% of any dollars made above $16,335, based on the 2011 poverty line.

And unemployed graduates with no income would owe no monthly payments on their student loans, education experts say.

2. New provision to allow loan consolidation

The proposal would impact students with both direct loans and federally backed loans, allowing students to consolidate loans held by private banks into direct loans.

Both kinds of loans are offered at the same interest rate. But having all federal loans consolidated into direct loans could give graduates a chance at forgiveness programs if they work in public service or at nonprofits for a decade.